Abstract Accumulation of bioactive lipids such as diacylglycerol (DAG) and sphingolipids are one mechanism proposed to promote muscle insulin resistance. Recent data indicate these lipids are located in membranes, but the distribution and signaling of DAG and sphingolipids in specific cellular organelles which regulate insulin sensitivity is not known. There is a critical need to address these gaps in knowledge to design appropriate interventions to prevent and treat lipid-induced insulin resistance. The overall objective of this project is to determine the impact of changes in subcellular DAG and sphingolipid species, signaling, and metabolic function before and after insulin sensitizing lifestyle interventions. Our central hypothesis is that DAG and sphingolipids in muscle promote insulin resistance via mechanisms that are unique to location, type of lipid, and species. The rationale for the proposed research is that elucidating changes in localized DAG and sphingolipid species that predict insulin sensitivity will reveal specific localized lipids to target in therapeutics for type 2 diabetes. To attain our overall objective, we propose three specific aims: 1. Identify the influence of sarcolemmal DAG and sphingolipids on cell signaling and insulin sensitivity before and after insulin sensitizing lifestyle interventions. Strong preliminary data shape our hypothesis that sarcolemmal 1,2-disaturated DAG and C18:0 ceramide species will decrease after insulin sensitizing lifestyle interventions, leading to less PKC and PP2A activation, and enhanced insulin signaling. Skeletal muscle DAG and sphingolipid isomers, species, localization, and de novo synthesis will be measured before and after diet-induced weight loss or exercise training interventions in obese men and women. Insulin sensitivity will be measured using insulin clamps, and muscle lipids using LC/MS. 2. Determine the impact of mitochondrial/ER DAG and sphingolipids on mitochondrial function and ER stress in vivo, before and after insulin sensitizing lifestyle interventions. We hypothesize, again based on preliminary data, that mitochondrial/ER sphingolipids will decrease, yet DAG will increase after insulin sensitizing lifestyle interventions, and each will associate with increased insulin sensitivity. Changes in sphingolipids will relate to increased mitochondrial function, less ER stress, ROS, and acyl-carnitine formation, while changes in DAG will relate to increased mitochondrial content and dynamics. 3. Identify the effect of exogenous DAG and sphingolipids on mitochondrial function in vitro, before and after insulin sensitizing lifestyle interventions. Our working hypothesis is that DAG and sphingolipids will reduce mitochondrial respiration and increase ROS and acyl-carnitine content, but will be attenuated after endurance exercise training. The proposed research is innovative because it represents a substantive departure from the status quo by addressing cellular compartmentalization of bioactive lipids. Our contribution will be significant by identifying key species and locations of DAG and sphingolipids promoting insulin resistance, as well as mechanisms explaining accumulation that could be modified by insulin sensitizing therapeutic interventions.